The frontline of the economy rub.

Today some Brisbane property owners woke up to this. 6 inches of horrible sticky mud absolutely everywhere. Luckily businesses on the river have insurance, which we hope will be paid out. For others it is a different story.

Queensland Premier Anna Bligh and Prime Minister Julia Gillard have both implored insurance companies to be flexible when it comes to processing the thousands of claims being lodged.

“I call on insurance companies to act with compassion in the face of this event,” Ms Bligh told ABC Radio.

“It’s not in the interests of anyone in our community, including those companies, to stall or delay recovery.”

Rather, insurers should show “flexibility”.

The Insurance Council of Australia has warned that insurance companies would pay out on claims according to the terms and conditions of policies.

“If people do not purchase flood cover insurance, they will not be covered,” an ICA spokesman said yesterday.

It is estimated more than half of all insured homes in Queensland are not covered for flood damage.

So imagine this; You purchased a house in the last two years, you didn’t insure it for flooding because you were told that the Wivanhoe dam meant Brisbane would never flood. Now you have a $300,000 mortgage on a house that it under 10 feet of water that is literally worthless in every way.

You owe $21,000 per year on a property that you can’t live in and you cannot sell, but the debt on it means you can’t afford to move somewhere else. The banks are giving you a 3 month reprieve.

AUSTRALIA’S big banks will freeze mortgage repayments for up to three months for home owners hit by Queensland’s devastating floods.

Many lenders will also offer emergency increases to credit card limits and allow some to make early withdrawals of term deposits to get access to funds.

Those moves came as analysts predicted the floods were likely to cause a rise in bad loans because of defaults.

Which will give you 3 months to find a solicitor to declare bankruptcy.

The reason we are talking about this is because we met someone in this situation today, it was terribly heartbreaking; but we know they are not alone, there are probably thousands of people just like this.

The federal government’s response to this disaster in the coming weeks and months will be very telling. We would hope that during a disaster of this kind, when thousands of Australians are suffering so horribly and so many have lost their lives, that someone within the economic elite of the government who actually understood how the Australian economy functioned had the internal resilience to explain to the PM how to use the economy to provide the best outcomes for the disaster effected.

But given the recent focus by the PM on keeping the surplus intact it seems that even in the worst of times economic ignorance and stupidity still wins through. We hope this is will not the case , but if it is then we expect the economic outcome will be just as horrible as the initial disaster.


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Comments

  1. If you can read the terrain,let alone a topographical map,then it will be obvious if an area is likely to be inundated,whether by a gully,a creek,a river or the ocean.
    If you insist on building in flood prone areas then you had better have a Plan B for when the waters rise,as they inevitably will.

    Even ants know this.Presumably the boobs from the burbs and other fine fools from the lowlands have less brains than an ant.

  2. Thirra – people were encouraged to build there by the authorities, otherwise the land would not have been zoned residential – would it?

    We can rely on those in charge to lead ordinary folks up the creek, in large ways and small.

    Some of Brisbane's trendiest suburbs have been revealed as the most prone to flooding.

    Brisbane City Council this morning released new computerised mapping…

    The maps, which have never been released in Brisbane, show how flooding affects every street in the city."

  3. @Mercury4 – "We can rely on those in charge to lead ordinary folks up the creek, in large ways and small."

    Indeed. But that doesn't mean that those who follow them up the creek aren't stupid. Personally, I wouldn't buy any property that wasn't well above most of the surrounding terrain. Flash flooding can occur even in inland dry climate areas.

  4. I live in Brisbane, and while I really empathize with those who have lost their homes, I don't know anyone that would have said Wivanhoe dam meant Brisbane would never flood.

    If it was built to protect against 1-in-100-year rains, then 1-in-200-year rains will cause flooding, assuming you believe they can accurately model that sort of stuff. Personally, I don't think we know as much about the climate as we think we do.

    When I was house hunting 5 years ago, I certainly checked the 1974 flood maps to get an idea of what happened then.

  5. @heyworth

    Yes, it is too easy to conclude that people do stupid, craven and self-destructive things. Or, seeing they are drawn from the same gene pool/cultural well, that it's any wonder we also get stupid, craven and self-destructive authorities?

  6. intuitivereason

    I wonder whether this sort of situation is one where you do the normally taboo and simply print the money to recover. Against that is the consideration that you are setting up a moral hazard that people will come to depend upon in the future.

    Hard.

  7. I had the misfortune to flick on the TV this morning to see an economist spruiking the residential rental market in Queensland, citing continued population growth of 1,000 people per week and the present need for owners of flood damaged properties to seek alternative temporary accommodation. This little weasel of a man predicted, with a grin I did notice, that residential rents are set to skyrocket in Queensland.
    One would hope that landlords would do the right thing and keep rents affordable during the rebuilding of Queensland process, and that perhaps immigration could be halted for a while, but I suspect that once again greed will rise to the surface to do battle against those trying to do the right thing.
    And whilst I do think that it would be a fair thing for donated funds to be used to accommodate people in this time of crisis, I hope that those providing that accommodation, i.e. landlords, are prevented from escalating their prices as per the predictions of that smug looking little 'economist' (possibly hired by the real estate industry? Nah, even they wouldn't sink that low, surely) already spruiking this likelihood.

  8. I think the lack of economic activity due to many small businesses being wiped out due to lack of insurance will offset landlords being able to ask for higher rent. With the majority of people owner occupiers, most people will be focusing on the clean up.

    There may be some stupid low educated renters that opt to only rent in 'high ground' putting pressure on rental prices in those neighbourhood, but overall I think the Queensland economy is as good as gone for 2-3 years so that will stymie the 'demand' side of the price equation.

    Victoria's economy may take the growth hit next, with the link to Adelaide currently cut off, and many people in rural Victoria without flood insurance due to 10 years of drought. Victoria has no mining business to offset this.

  9. @Mercury4

    Yup, we get the leaders we deserve. No accident that the best leaders emerge when the naivety of the populace has been diminished by hard times.